Western Forest Products Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the Western Forest Products third quarter 2021 result conference call. During this conference call, Western's representatives may make forward-looking statements within the meaning of applicable securities law. These statements can be identified by words like anticipate, plan, estimate, will, and other references to future periods. Although these forward-looking statements reflect management's reasonable beliefs, expectations, and assumptions, they are subject to inherent uncertainties and actual results may differ materially. There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's manual MD&A, which can be accessed on SADAR and is supplemented by the company's quarterly MD&A. Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western takes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Don Demmons, President and CEO of Western Forest Products, Mr. Demmons, please go ahead.

Well, thank you, Kate, and good morning, everyone. I'd like to welcome you to Western Forest Rock's 2021 third quarter conference call. Joining me on the call today is Stephen Williams, our Executive Vice President and Chief Financial Officer, and Glenn Nontel, our VP of Corporate Development. We issued our 2021 third quarter results yesterday. I intend to provide you with some introductory comments and then ask Steve to take you through a summary of our financial results. I'll follow Steve's review with our outlook section before we open the call to your questions. Before I begin, I'd like to recognize our team at Western for their continued strict adherence to our robust COVID safety protocols. Their dedication to safety has delivered another quarter with no COVID workplace transmissions or downtime. This result is a testament to our strong safety culture and the commitment of our people. Financially, I'm pleased to report that our results were a third quarter record for the company. Our specialty products focus and ability to pivot production from volatile North American commodity markets to more stable export markets allowed us to generate record third quarter adjusted EBITDA of $66.3 million. This result is almost double the EBITDA we delivered in the third quarter of last year. Our strong operating results have allowed us to reposition our balance sheet and continue with our balanced approach to capital allocation. Year-to-date, we've returned over $80 million to our shareholders through dividends and share repurchases. And we ended the third quarter with $143 million of cash in our balance sheet and more than $140 million Canadian dollars on deposit with the U.S. Treasury. In conjunction with these excellent results, we've also continued to demonstrate our leadership in advancing our ESG commitments. During the third quarter, we achieved a series of milestone agreements focused on joint and collaborative planning of forestry activities with Indigenous nations in whose traditional territories we operate. These partnerships build upon Western's well-established sustainable forestry practices by incorporating Indigenous values within planning and forestry activities. We're committed to fostering positive working relationships with Indigenous nations in support of reconciliation and know that by doing so, we will also create more certainty for our business. During the quarter, we also became the first North American publicly traded forest company to transition to a sustainability-linked credit facility. linking the interest rate we pay to the achievement of certain sustainability goals. And finally, we announced a new eight-year labor agreement with the hourly employees of our value-added division. I'm proud of what our team at Western has been able to accomplish, and I look forward to continued success and growth together as we move forward. I'll now turn it over to Steve to review our key financial results.

Thanks, Don. Thanks, Don. My comments will focus primarily on our financial results for the third quarter of 2021 with comparisons to the third quarter of last year. We reported third quarter adjusted EBITDA of $66.3 million as compared to $33.7 million in the same quarter last year. Results in the quarter benefited from higher lumber and log prices, an increase in lumber shipments, higher byproduct revenue from improved chip price realizations, and lower export tax expense. Results were partially offset by lower log shipments, higher stumpage expense, and higher performance-based compensation expense related to our strong financial results and the appreciation of our share price. Lumber revenue increased 44% compared to the third quarter of 2020 on increasing shipment volumes and higher prices for our products. Our third quarter average realized lumber price was $1,553 per 1,000 board feet, an increase of 23% compared to the same period last year. Log revenue was lower in the third quarter of 2021 compared to the same quarter last year, as a prolonged fire season led to Timberland's operating entailments, which limited log harvest and sales volumes. We directed export-grade log supply to our sawmills to support lumber productions. Byproduct revenue increased by $3.8 million as compared to the same quarter last year, benefiting from improved chip price realizations due to a higher NBSK pulp price. Freight expense was flat as compared to the same quarter last year. Increased lumber shipment volumes and higher freight rates were offset by a reduction in export log shipments. Third quarter results included $6.2 million of export duty expense. as compared to $11 million in the same quarter last year. Lower duty rates more than offset the increase in U.S. deaths in lumber shipments and higher lumber prices. At the end of the quarter, we had approximately $116 million U.S. of duties on deposit. Lumber production decreased 9% compared to the same quarter last year due to log supply-related operating curtailments. Log production in the third quarter of 2021 was 39% lower than the same quarter last year. Harvest activity was impacted by prolonged operating curtailments as fire conditions persisted for longer than usual in the summer. We ended the quarter with approximately 753,000 cubic meters of log inventory, which is lower than historical levels for the end of the third quarter. Our BC coastal per unit harvest costs increased by 17% from the same period last year, driven by higher stumpage costs and lower harvest volume. From a profit and loss perspective, third quarter net income was $42.2 million as compared to $11.5 million in the same quarter last year. Looking at third quarter cash flow and capital management. Cash provided by operating activities after changes in non-cash working capital was $82.5 million in the third quarter, as compared to $40.4 million in the same quarter last year. Cash used in investing activities was $1.1 million in the third quarter, as compared to $4.6 million in the same quarter last year. Capital expenditures in the third quarter of 2021 were offset by proceeds from asset sales of $5.5 million. We returned $33.8 million to shareholders during the quarter via dividends and share repurchases. Year to date, we have returned over $80 million to shareholders. We ended the quarter with $143 million in net cash and $384 million in available liquidity. Don, that concludes my comments.